Innovation in Flux
Over 70 percent of pharma leaders admit their business relies heavily on fading revenue streams – but how can we promote much-needed innovation in the current climate of uncertainty?
The world used to be a predictable place. From the dawn of human history up until around 1980, it could be argued that the world – and technology specifically – changed at a more or less steady and easily anticipated rate. Occasionally accelerated by large-scale environmental or human events, or disruptive breakthroughs like steam power, electricity or atomic energy, businesses could, nonetheless, place strategic bets on what would happen next.
As the pharmaceutical industry became established, there arose a clear need for long-term strategic thinking and investment, but it was still acceptable to take 15 years to get a new drug to market, because the clinical need would likely still be there when it finally launched. Pre-1980s, innovation was (for the most part) about gradual evolution rather than taking a leap into something new.
Around 1980, we started to see the velocity of change increase exponentially, driven by accelerating globalization and digital technology. In the pharmaceutical industry this was the beginning of biotech-mania, during which many traditional big players were only able to keep up with smaller, entrepreneurial start-ups through a frenzy of expensive acquisitions. Smaller players in turn lacked the cash and global reach to conduct large-scale drug trials and carry out global marketing. At this time, there was an increasing proliferation of future-gazing, as the industry tried to make sense of where the world was heading.
Jumping ahead to the collapse of Lehmann Brothers and beyond, we find ourselves living in a new age; a world of chaotic change, with technology advancing by seemingly random leaps, innovation becoming increasingly discontinuous, and global stability under threat. It is an age when old certainties die, with knock-on effects on apparently unrelated industries and institutions.
No longer is it enough to just keep a wary eye on competitors in your own sector; change now comes from anywhere and at any time. For the CEO, rigorous analysis is no longer enough. Moving quickly won’t help you when the goal posts keep shifting. More and more, leaders must possess skills of imagination, creativity and comfort with uncertainty.
What next?
How can we plan for the future? And how prepared is the pharmaceutical industry to adapt? Recent research by ?What If! revealed that 48 percent of pharma leaders say their assumed innovation pipeline has the greatest influence on the market’s perception of their company’s value. Despite this, only 38 percent are very satisfied with their current pipeline. More concerning still, almost three quarters (72 percent) believe their business model relies too heavily on fading revenue streams. And despite this clear need to innovate, almost two thirds of leaders (64 percent) say it’s almost impossible to gain support to test new ideas.
So, what can pharma leaders do to embrace this age of chaotic change and future-proof their organizations? No one strategy can guarantee success, but four key tenets can help companies navigate times of uncertainty.
1. Have a heart
Rather than trying to guess what future technologies might emerge, make sure you anchor your development strategy to an enduring emotional customer need.
When exploring the human needs around advanced breast cancer for example, we hear again and again that being able to continue to ‘feel like a woman and a mother’ mattered more to patients than many of the clinical signifiers of disease. A smart company would explicitly build ‘feel like a woman and a mother’ into the goals of treatment alongside a more technical goal such as ‘increase progression-free survival by X percent’.
2. Bet on the trend, and against it
Just a few years ago the mobile phone industry seemed to be on a certain and inevitable path towards ever-smaller devices. Who then would have predicted that Apple would this year announce its biggest ever iPhone alongside its most compact product to date; the Apple Watch. In other words, the trend continued but also took a dramatic U-turn as content streaming demanded bigger screens.
The lesson here is that when your industry or category seems to be on any sort of definite path, be sure to place a side bet on the opposite happening.
3. Form bonds
In an age of chaotic change, the innovation that will disrupt your business may already be here, just in a different area or another part of the world. Can you build new networks today with smart folks in other categories to help each other spot emerging disruptions outside your own business?
Find an issue you have in common, which will typically be wider than your own category concern. For example a question around ‘what is the future of the home?’ will draw in more collaborators from more fields than a narrower question such as ‘what next for telemedicine?’ Synthesizing possible futures from these conversations will allow you to place a number of large R&D bets on the future with confidence.
4. Hedge your bets
Humans are ingenious and our history suggests that if a problem matters enough, we will always find a solution. If your business is based on incremental improvements to existing solutions for a major problem, such as diabetes, be prepared for a major disruption that you can’t see yet. Recent reports of a putative cure for type 1 diabetes in the press (1) suggest that this may in fact be quite close.
From a practical point of view, you must diversify away from a business model that has too many eggs in the same basket, embrace business model innovation, and be ready to accept the inevitable early, if a genuine disruption to your business appears.
Disruptive change is constantly threatening to sweep away the foundations on which many people have based their careers by introducing simpler, cheaper, faster solutions. And faced with a threat, the super-intelligent inhabitants of pharma companies can find myriad ways to form roadblocks, citing safety, regulation, lack of proof, their own deep expertise and so on, to create a thick layer of internal glue. A partial solution to this can be found in using organizational models of innovation that create a protected space for innovation where needed.
In pharma, more agile companies are increasingly moving towards creating specific innovation eco-systems with everything from people to funding to governance, at arm's length from the rest of the organization, particularly when attempting the business model innovation that will reshape their futures.
Change has changed. From travelling to the future along predictable straight lines to making breathtaking leaps to unimaginable new universes. If you are prepared for the journey, it could be the ride of your life!
Jon Platt is a Director at ?What If!, Europe.
- F.W. Pagliuca et al., “Generation of Functional Human Pancreatic β Cells In Vitro”, Cell 159(2), 428–439 (2014).
Armed with an MA from Oxford University in the UK, Jon forged a successful career in the advertising industry where he was creative director for three major multinational advertising agencies in the UK and Australia. After 20 years of writing commercials for everything from banks to AIDS awareness, Jon decided it was time to apply his creative skills to more strategic upstream problems, an impulse that led him to join ?What If!, where he went on to found the Manchester office and pioneer the company’s move into the pharmaceutical sector.
